Late Surge in Equities and Energy Pressures U.S. Dollar

By: Brewer Futures Group | Fri, Aug 28, 2009
Print Email

The U.S. Dollar gave back earlier gains to finish lower against all major currencies. Early in the trading session the Dollar received support from a friendly U.S. Second Quarter GDP Report. This report showed the economy as flat rather than the pre-report estimate of a 1.5% lower.

Overall choppy, two-side trading conditions dominated the Forex markets today. Light volume makes these markets vulnerable to whip-saw like actions.

The Forex trading session turned volatile at about midsession following a report which showed that the FDIC was monitoring a record number of banks in trouble. Equity markets also began to rally along with crude oil, sending the Dollar sharply lower into the close.

The EUR USD rallied on Thursday. The battle continues between the Fed and the European Central Bank as to who will raise interest rates first. Traders will be placing bets based on which country will lead the world out of the recession. The strong surge in equity and energy markets late in the day helped boost the Euro.

Technical factors helped rally the GBP USD today. Fundamentally, this market has been under pressure since the first week in August when the Bank of England decided to expand its quantitative easing program. Oversold conditions helped trigger a short-covering rally today.

Oversold conditions and an increase in demand for higher risk assets helped boost the Canadian Dollar. As the day began traders were noting the start of another risk aversion phase in the marketplace, but this way of thinking quickly evaporated when the equity markets rebounded following a sharp sell-off at the midsession.

The USD JPY was under pressure the entire trading session as Japanese investors repatriated funds in anticipation of weakness in the Chinese equity markets. Traders feel a slow down in Chinese growth will spread to other markets. Japanese traders are looking for safety at this time until they can get a better assessment of what the Chinese government wants to do to curb over capacity and reckless speculation.

The late session surge in U.S. equity markets triggered huge demand for higher yielding assets boosting the AUD USD and NZD USD into the close. For much of the week, the Australian and New Zealand Dollars have struggled to hold on to recent gains because of concerns that the Chinese regulators would implement new rules to stifle excessive growth in their economy. Today's strength in the Australian Dollar came from a report showing that Australian business investment unexpectedly rose in the second quarter.



Brewer Futures Group

Author: Brewer Futures Group

Contact us at:
Local: 312-896-3930
Toll Free: 1-800-971-2440

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Copyright © 2009-2010 Brewer Futures Group

All Images, XHTML Renderings, and Source Code Copyright ©